Author(s):
Andrew MacDougall, Robert M. Yalden
December 2014
Corporate governance in Canada is founded on a system of legal rules that involve a single-tier board model similar to, and influenced by, the systems seen in the United Kingdom and the United States. Overlaying this is an extensive array of best practices that are promoted by securities regulators, stock exchanges, institutional shareholder groups, the media, and the high proportion of public corporations in Canada that have a dominant or controlling shareholder, either through equity ownership or the ownership of multiple voting rights, and the economic clout and organization of Canadian institutional investors, including the Canadian Coalition for Good Governance (CCGG), a national institutional investor organization that has pursued an organized program of advocating its views on best practices without resorting to proxy battles. Legal rules are less prescriptive than in the United States, generally taking a comply-or-explain approach reflective of practice in the United Kingdom and other jurisdictions. While the Supreme Court of Canada recently affirmed that a board of directors in Canada owes its fiduciary duties to the corporation rather than any single constituency, pressure from the media, investor rights activists, and other groups has led to voluntary adoption of many practices by companies that are not addressed by legal rules and that reflect the desire on the part of particular stakeholders to have a more direct say on matters of importance to the corporation.
Many of the topical issues in corporate governance in Canada today reflect a particular effort on the part of shareholders, both institutional and activist, to exercise more influence. Institutional investors have lobbied for greater voting influence through the adoption of majority voting for directors and say-on-pay and other voting initiatives. These efforts and the impact of increased shareholder activism in Canada in recent years has prompted a re-examination of Canadian proxy rules and the impact of proxy advisory organizations by regulators, and the adoption of advance notice provisions for nomination of directors by companies. In addition, the Ontario Securities Commission (OSC) is proposing to introduce new disclosure rules respecting the representation of women on boards and director tenure.
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Reproduced with permission from White Page Ltd. This article was first published in NYSE: Corporate Governance Guide (December 2014).